Should You Take Financial Products/Advice From Banks?

I am sure we all must have received  calls from our banking relationship managers trying to convince us to buy so and so financial product..may be its a mutual fund scheme or insurance investment product. When we go to our banks, they will try and push us to buy one of their financial product, whether we require it or not.

Do they really care what is best suited for us without understanding our investment objectives and risk profile? No. They have to just  meet their targets by selling(or mis-selling) a financial product as part of their non banking revenue generation.When I say mis-selling, I mean

1. Concealing material, important and relevant information about the product
2. Whether the product is suitable to the customer or not
3. Not explaining the risk associated with that product and
4. Making misleading and false statement

This kind of mis-selling by our banks is difficult to quantify because most of these things happen through verbal communication and we end up buying their financial products which are neither suitable for us nor help us meeting our financial goals.

Many Asset Management Companies (AMC) which are running different mutual fund schemes are from the same fund houses which own these banks. Most of the banks will try and sell their own financial products, irrespective of the fact whether it’s beneficial to us or not.  Please take a look at the table below which shows that these banks get maximum commission by selling their own mutual fund schemes.(courtsey: OutlookAsia)

So should we go ahead with buying financial products as offered by our banks or should we take a deliberate decision where to invest our hard earned money? Before deciding which financial product would be good for us, let’s spend some time in deciding our future goals, do our risk assessment and then start investing in the most suitable financial product which has the potential to meet our financial goals.

If we  find it difficult to  handle this, no  harm  in  taking  financial  advice  as we  take it  in other matters (legal, medical etc). Avoid taking advise from Banks on your personal financial matters. They may not be true to you…

Disclaimer : No offence meant for Indian banks.